Chapter 1 Outline: • A Quick Look • Business Finance and The Financial Manager • Forms of Business Organization • The Goal of Financial Management • The Agency Problem and Control of the Corporation • Financial Markets and the Corporation 2

1.1 A Quick Look Four Basic Areas of Finance 1.Corporate Finance A. Capital Budgeting – Do a proposed project? B. How do you pay for the project? (Three choices) C. Working Capital Management 2.Investments 3.Financial Institutions 4.International Finance Lets go over these in more detail 

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Four Basic Areas of Finance 1.Corporate Finance A. Capital Budgeting – Do a proposed project? • You have an idea. Will it make money? • Will the idea “Increase the firm’s value” • How many units can we sell? (Marketing) • How much will it cost to make the units? (Operations) B. How do you pay for the project? (Three choices) 1. Sell a piece of the company • Sell an Equity stake a.k.a. sell stock 2. Borrow the money • Sell Debt securities a.k.a. sell bonds 3. Retain Earnings • Keep past profits to finance expansion 4

– Firms sell securities (stocks and bonds) – Someone buys them – Which ones should you buy? – What are the worth? • This is called Securities Analysis – If I hold a bunch of different securities called a portfolio ), how do the different securities combine into portfolios? • This is called portfolio analysis

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